=+Reconsider the Auscompt example (pp. 265–273). Auscompt’s marketing manager realises that a further reduction in price is necessary to sell 200000 units of Hellovalue II. To maintain a target profitability of $16 million, or $80 per unit, Auscompt will need to reduce costs of Hellovalue II by

$6 million, or $30 per unit. Auscompt targets a reduction of $4 million, or $20 per unit, in manufacturing costs, and $2 million, or $10 per unit, in marketing, distribution and customer service costs. The cross-functional team assigned to this task proposes the following changes to manufacture a different version of Hellovalue, called Hellovalue III:

1 Reduce direct materials and ordering costs by purchasing subassembled components rather than individual components.